Seventh Guilty Plea in Connection with Scheme to Fraudulently Control Condominium Homeowners' Associations
WASHINGTON – A Las Vegas woman pleaded guilty today for her role in a scheme to fraudulently gain control of condominium homeowners’ associations (HOAs) in the Las Vegas area so that the HOAs would direct business to a certain law firm and construction company, announced Assistant Attorney General Lanny A. Breuer of the Criminal Division, Special Agent in Charge Kevin Favreau of the FBI Las Vegas Field Office, Sheriff Doug Gillespie of the Las Vegas Metropolitan Police Department and Special Agent in Charge Paul Camacho of the Internal Revenue Service-Criminal Investigation (IRS-CI).
Mary Ann Watts, 64, pleaded guilty before U.S. District Judge James C. Mahan in the District of Nevada to one count of conspiracy to commit mail and wire fraud. Watts is the seventh person to plead guilty in connection with the scheme to defraud HOAs in the Las Vegas area.
Watts admitted that from approximately the spring of 2006 until February 2009, as an employee or operator of property management companies in Las Vegas, she participated in a scheme to control various HOA boards of directors so that the HOA boards would award the handling of construction-related lawsuits and remedial construction contracts to a law firm and construction company designated by Watts’ co-conspirators.
According to plea documents, to accomplish the scheme, co-conspirators used straw purchasers to obtain mortgage loans for units within HOA communities and managed and operated the payments associated with maintaining the straw properties. The co-conspirator straw purchasers agreed to run for election to the respective HOA boards and were paid in cash, by check or promised things of value for their participation, resulting in a personal financial benefit.
According to plea documents, co-conspirators employed deceitful tactics in their attempts to win the board elections, including creating false phone surveys to gather information about voting intentions, using mailing lists to vote on behalf of out-of-town homeowners unlikely to participate in the elections, and submitting fake or forged ballots. The c o-conspirators also attempted to create the appearance that the elections were legitimate by hiring independent attorneys, or “special election masters,” to run the elections. However, these individuals were paid in cash, by check and promised things of value for their assistance in rigging the elections. Watts admitted that in November 2006, at the direction of co-conspirators, she participated in rigging an HOA election at the Vistana community in Las Vegas by ceding her role in the election as community manager and providing the election ballots to a co-conspirator attorney acting as a “special election master.”
According to court documents, once elected, the co-conspirator board members would meet with other co-conspirators to manipulate board votes, including the selection of property managers, contractors and general counsel for the HOA and attorneys to represent the HOA. The co-conspirators created and submitted fake bids for “competitors” to make the process appear to be legitimate while ensuring co-conspirators were awarded contracts.
According to plea documents, co-conspirator community managers and general counsel were paid in cash, by check or things of value for using their positions to gain inside information and recommend that the HOA board hire a co-conspirator for remediation and construction defect repairs and another co-conspirator for the construction defect litigation. Watts admitted that she employed co-conspirators and failed to disclose their conflict of interest to the HOA, in violation of her fiduciary duties.
Watts admitted that in August 2006, she agreed with other co-conspirators to open a new property management company, which would be owned and controlled by the co-conspirators, for the purpose of managing the HOA board at Vistana, as well as Chateau Versailles, Chateau Nouveau and other condominium complexes around the Las Vegas area. Watts admitted that she lived in a unit at Chateau Nouveau and received several months of free rent from her co-conspirators as a bonus for her participation in the scheme. Watts managed all of the company’s expenses and was reimbursed by a co-conspirator. Watts also admitted that she often issued her co-conspirator checks from the HOA’s account and paid several of the co-conspirators’ employees as if they were employed by the property management company in order to conceal the employees’ relationship with the co-conspirator.
Watts admitted that she also used her position as the community manager to allow co-conspirators to create and review the HOA board meeting agendas before the board meeting, so the co-conspirators could meet with the co-conspirator board members to pre-arrange how they would manipulate the upcoming votes. Watts then allowed her co-conspirators to call her phone to speak with the co-conspirator board members during board meetings in order to conceal their relationship.
Watts recommended that the HOA hire individuals and companies designated by her co-conspirators while concealing her and the company’s relationship with the co-conspirators from the bona fide homeowners. In or around November 2006, Watts, at the direction of a co-conspirator, called an emergency executive board meeting for the purpose of getting the board members’ signatures on the contract that was to award a co-conspirator with the construction defect litigation case before the next HOA board election was held.
Sentencing is scheduled for Jan. 20, 2012, at 10 a.m. The maximum sentence for conspiracy to commit mail fraud and wire fraud is 30 years in prison.
The case is being prosecuted by Deputy Chief Charles La Bella and Trial Attorneys Nicole H. Sprinzen and Mary Ann McCarthy of the Criminal Division’s Fraud Section. The case is being investigated by the FBI; the Las Vegas Metropolitan Police Department, Criminal Intelligence Section; and the IRS-CI.
This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.